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Potential for increasing yields is a ‘great opportunity’ for landlords

A new report has revealed what the biggest opportunities will be in the buy-to-let space in 2023, and increasing yields came out on top as one of the most promising outcomes of the year ahead.

A return of normal, seasonal peaks and trough was one of the significant findings from Propertymark’s latest annual report, which comprises a review of the property market of 2022 as well as an outlook towards 2023.

It demonstrates that, after a tumultuous period during 2020 and 2021 for the housing market, 2022 was a transitional year where we began to see more standard patterns emerge. This includes a shift back towards the buyer’s market, says the report.

Based on responses from Propertymark’s large body of agents, the survey gives an insight into both the sales market and the lettings market. Focusing on the future in lettings, the yields outlook for landlords was another major positive takeaway from the report.

Yields rising in prominent areas

Positive rental yields are driven by both healthy rents being achieved, as well as competitive pricing for investment properties. In the current climate, where rental demand continues to swell while house price growth slows, there is a big opportunity for landlords to boost their yields.

Propertymark notes that the number of people seeking homes in the private rented sector is bigger than ever, based on 2022’s peak levels of prospective tenants registering at member branches. This is pushing up prices and rental yields for landlords.

The report says: “A new monthly record was set in September at 147 new prospective tenants per member branch. Demand for rental property has grown every year since 2018, when Propertymark records began.

“At the same time, there has been no growth in the size of the private rented sector (PRS) to house these tenants2. With such a mismatch in demand and supply, it is no surprise that rents have risen most keenly in 2022.”

While the report doesn’t detail the different areas across the country where rents have risen the most, parts of the country that have seen notable rises in rental demand include the north west, Yorkshire and the East and West Midlands, according to many reports.

Opportunities for landlords

Although stock levels for rental property remain lower than the demand, they did improve over the course of the year to around 10 properties per branch. Yet, as Propertymark notes, there were around 11 prospective tenants per property listed during 2022, another driver behind the rising rents.

“The percentage of member agents seeing rent rises in their areas has risen dramatically over the last five years as pressure on the sector to house the UK public has risen with no change in the number of homes provided in the PRS.”

The report also asked agents where they saw the most potential for buy-to-let landlords over the course of 2023. More than half (57%) said they believed increasing yields presented the biggest opportunity for investors.

It points out that those landlords who are the least reliant on finance, or those who have long-term products that are not set to expire, should see their yields rise the most as rents continue to climb. Those who are about to remortgage or take out new products could see their costs go up, though.

As the price of property stabilises, a third of agents (31%) said they saw increased stock and investment options as the next biggest opportunity for those operating in the buy-to-let space. This could also be as a result of some landlords leaving the market, making space for new landlords to step in.

BuyAssociation has access to property investment opportunities across the UK, in some of the towns and cities with the highest yields in the country including Liverpool and Manchester. Get in touch for more information.

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